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Bush's 3 big threats on the economy WASHINGTON, Aug. 10 (UPI) -- "President Bush needs three things to happen on the economic front by November to ensure his reelection or he's toast." The prediction did not come from some prominent Democrat or liberal columnist but from a senior executive with a proven economic and business track record at one of Washington's leading conservative think tanks. According to this conservative figure, who has never voted for a Democratic presidential ticket any time in his life, Bush and his economic policy strategists need three things to happen to ensure their reelection, even if the mounting death toll of U.S. soldiers in Iraq dramatically falls, which so far shows no sign of happening. These are: First, that U.S. stock market indices to raise and stabilize at least 10 percent above where they are; Second, that official figures record the robust, unambiguous creation of at least 250,000 jobs in both August and September; And third, that global oil prices fall and stabilize well below $40 a barrel. The conservative analyst, who understandably spoke on condition of anonymity, was not just whistling Dixie. The reasoning behind his assertion was rooted in the traditional patterns of U.S. politics going back to the founding of the Republic, but especially striking in recent decades. Unless the United States is involved in a full-scale war where thousands of U.S. soldiers have already died, economic considerations are almost always the decisive factor governing the reelection campaign of any incumbent president. The late Ronald Reagan realized this very clearly in 1984 when he asked the American people, "Are you better off now than you were four years ago?" They responded by sweeping him back for another presidential term with one of the largest majorities in U.S. history. President Bill Clinton was able to make the same argument with telling force in the 1996 campaign and he too coasted home to a second term President George W, Bush and his master-strategist Karl Rove have always understood very clearly too that it is still "the economy, stupid," to echo the power-winning strategy of Clinton's masterful campaign planner James Carville. That is why they have ignored every principle of pre-Reagan Republican financial prudence going all the way back to Abraham Lincoln and run up unprecedented federal budget deficits of around half a trillion dollars per year, when they inherited $150 billion plus budget surpluses from the Clinton administration little more than three and a half years ago. Bush and his administration have allowed federal spending to soar to a colossal more than 6 percent of Gross Domestic Product per year, a highly worrying figure. Already, the strength of the dollar and the continued stability of the U.S. economy depends in large part on the continued willingness of the major Japanese and Chinese banks to go on holding U.S. Treasury bonds. And this in turn makes it virtually impossible to take any steps to protect collapsing domestic U.S. industries from the flood of Japanese and Chinese exports to the United States that continue to take advantage of vastly unrealistic and favorable -- to them -- exchange rates. The huge increase in the federal deficit under Bush is in both dollar terms and as a percentage increase of GDP in real terms one of the largest such increases of any administration in U.S. history. It dwarfs even the great increases in federal spending under Lyndon Baines Johnson in the 1960s and compares vastly unfavorably with the growth in the federal deficit incurred under President Jimmy Carter. Reagan campaigned against that growing deficit in 1980 and then promptly quadrupled it after taking office. It took tough decisions by both Republican and Democratic presidents and congressional leaderships under President George Herbert Walker Bush, the current president's father and under Clinton to restore the long-term fiscal stability of the federal government. Yet for all this vast increase in red ink, much of it expended not to fight the war on terror but just to carry Bush's more than $1.3 trillion in long term tax cuts, the economy is not responding. Insiders say Bush's Council of Economic Advisers are astounded by this refusal of the pesky, ungrateful economy to rear up on its legs and bark happily at the hundreds of billions of deficit dollars being thrown at it, but the reasons are not hard to find. The war in Iraq is spiraling out of control and Iraqi oil production remains mired around 2.3 million barrels a day, more than half a million barrels per day lower than the 2.8 million to 3 million barrels per day it averaged under Saddam Hussein when the United States invaded in March 2003. Global oil prices, far from falling below $40 a barrel are now spiraling up around $44. Now that National Security Adviser Condoleezza Rice has started talking about Iran's nuclear weapons program in the exactly the same way she and other top officials talked about Saddam's alleged -- but, as it turned out, non-existent -- weapons of mass destruction before launching a war on him, global oil prices over the next two months might even spiral far higher still: $50 a barrel oil is therefore no longer inconceivable. That may turn out to be the kind of October Surprise the administration does not want -- or expect. With soaring oil prices, Iraq out of control and the threat of getting involved in yet another Middle East war when the administration is in danger of losing control of the existing one, it is no wonder the Dow Jones Index is back below 10,000 and looking anemic. Ending the beat of war drums against Iran and scaling down the violent clashes in Iraq would at least be a first step towards reassuring markets that are not merely nervous but close to being terrified. But so far there is no sign of that happening. Until it does, the president and Federal Reserve Chairman Alan Greenspan can offer warm, uplifting reassurances till they are blue in the face. But Bush still won't get the market bounce he needs in November. That leaves job creation, and here the weak overall investment climate combines with the continued flow of under-priced Chinese and Japanese exports into the United States taking continued advantage of the overpriced dollar. Even when job creation figures were looking better superficially in recent months, more than half of them were either part-time or without health benefits: they were the kind of basement-level burger flipping gigs that the administration a few months ago famously tried in vain to get reclassified as serious industrial jobs. Some state economies like Florida and New Jersey are doing a lot better. But the anemic job creation figures are most ominous for Bush in crucial Midwest and Northeast industrial swing states like Ohio, Pennsylvania and Michigan. They hurt him in states like Oklahoma, Kentucky and Missouri too. Robust job creation and a booming economy were supposed to follow automatically from the huge tax cuts. So far, they still have not. The third quarter IRAs and 401K reports look like grim reading for tens of millions of Americans. They will be out just a few weeks before the presidential election. The president can still try and take steps to improve those figures and ease the oil price problem. But his room for maneuver is limited by his own commitment to his old policies. And time is running out.
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